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Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, 4th Edition



From the bestselling authors who predicted the 2008-2009 financial crisis comes their next wakeup call to Wall Street and Main Street investors: Prepare now for the coming Aftershock because this time not even massive government intervention will be able to stop it.

Don't let the all-time highs in the stock markets and "happy talk" from the financial cheerleaders fool you. This "recovery" is more fairytale than fact, created almost entirely by massive money printing and massive debt. While most people will ignore the warning signs, for wise investors who prepare now there's still time to protect yourself before it's too late.

This fourth edition of Aftershock is fully updated with new analysis, insights, and advice about how to see and prepare for the multibubble pop and global mega-recession ahead, including:

  • How to see the many vulnerable bubbles now holding up the fragile U.S. economy, temporarily supported by massive government stimulus that cannot last
  • What to expect here and around the globe when these huge bubbles begin to pop
  • How to prepare now for protection—and even profit—in the lead up to and during the coming Aftershock

From the reviews of the critically acclaimed First Edition:

"Their scenario is dark, and their strategies bold and unconventional. But after being on target the last time they went against the grain, the Wiedemers merit being heard out."
—The Associated Press

"Surrounded as we are by growing talk of recovery and news about 'green shoots,' it's still refreshing to consider the different perspective that Wiedemer, Wiedemer, and Spitzer offer here."
—Robert J. Hughes, SmartMoney

"Aftershock makes a compelling argument for a chilling conclusion. Their track record demands our attention."
—Sam Stovall, Chief Investment Strategist, Standard & Poor's

"The fragility of today's economy demands that we, as investors, allocate our assets with more prudence and focus than ever before. The authors' prescience in their first book lends credence to their new warnings. This book deserves our attention."
—Robert Friedman, former CFO, Goldman Sachs

"Their first book, America's Bubble Economy, was one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy. Now they've done it again."
—Paul B. Farrell, JD, PhD, Senior Columnist, Dow Jones/MarketWatch

DAVID WIEDEMER, PHD, is a world leader in macro-evolutionary economic analysis. His work in information dynamics, technological evolution, and economic history form the basis for the predictions in Aftershock. Dr. Wiedemer is the Chief Economist for Ark Financial Management. He holds a doctorate in economics from the University of Wisconsin-Madison.

ROBERT A. WIEDEMER is a Managing Director of Ark Financial Management, a macro-focused money management firm that is in alignment with the macroeconomic analysis and perspective of Aftershock.

CINDY S. SPITZER is an award winning writer, bestselling coauthor, and president of Aftershock Consultants LLC, an investment advisory and macroeconomic consulting firm providing support and insights to individuals, businesses, and groups, based on the ideas in Aftershock.

Executive Summary xiii

Acknowledgments xv

Preface xvii

Introduction: Your Guide to the Fourth Edition of Aftershock xxi

Part I: The Coming Aftershock 1

Chapter 1: This Recovery Is 100 Percent Fake Why the Aftershock Has Not Been Canceled 3

Isn’t a Fake Recovery Better than No Recovery at All? 5

If the Aftershock Has Not Been Canceled, Why Hasn’t It Happened Yet? 7

Still Not Convinced This Recovery Is 100 Percent Fake? 17

Don’t Believe the Stimulus Has to Eventually End? 25

Please Prepare Now 30

Chapter 2: America’s Bubble Economy Understanding How We Accurately Predicted the Financial Crisis of 2008 Is Key to Understanding Why Our Latest Predictions Are Also Correct 33

Because Our Earlier Books Were Right, Now You Can Be Right, Too 38

Didn’t Other Bearish Analysts Get It Right, Too? 41

How the “Experts” Got It So Wrong 43

Predictions from Ben Bernanke and Henry Paulson--We Trust These Officials with Our Economy 48

Where We Have Been Wrong 49

Chapter 3: Phase 1: The Bubbles Begin to Burst Pop Go the Housing, Stock, Private Debt, and Spending Bubbles 55

Bubbles “R” Us: A Quick Review of America’s Bubble Economy 56

From Boom to Bust: The Virtuous Upward Spiral Becomes a Vicious Downward Spiral 62

Pop Goes the Real Estate Bubble 64

Pop Goes the Stock Market Bubble 70

Pop Goes the Private Debt Bubble 74

Pop Goes the Discretionary Spending Bubble 77

The Biggest, Baddest, Bad Loan of Them All 80

Chapter 4: The Market Cliff Not Your Father’s Down Cycle 83

The Market Cliff Won’t Be Just a “Down Cycle” 84

Hitting the Market Cliff 89

The Last Resort: A Stock Market Holiday 93

When Is the Best Time to Get Out of the Stock Market? 95

Chapter 5: Massive Money Printing Will Eventually Cause Dangerous Inflation--So Why Hasn’t It Happened Yet? 97

What Is Inflation? 98

What Exactly Is Money Printing? 99

How Does Money Printing Cause Inflation? 101

Central Banks Gone Wild: The World Is Printing Money 103

Where Is Inflation Hiding? 107

The Arguments against Future Inflation Simply Don’t Hold Up 113

This Is Not a Plan--It’s a Panic! 120

The Real Problem with Rising Future Inflation: High Interest Rates 121

The Fed’s Big Blind Spot: They Don’t Understand Where Growth Comes

From (Hint: It Doesn’t Come from Rising Bubbles or Massive Money Printing to Support the Bubbles) 125

When Will Inflation Begin? When Group Psychology Turns Negative after the Market Cliff 129

The Inflation Deniers Are Liars! 133

Chapter 6: Phase 2: The Aftershock Pop Go the Dollar and Government Debt Bubbles 137

The Dollar Bubble: Hard to See without Bubble]Vision Glasses 138

The Government Debt Bubble Pops 158

The Aftershock 165

The Six Psychological Stages of Denial 166

Is There Any Scenario for a Soft Landing? 170

Chapter 7: Global Mega-Money Meltdown It’s Not Just America’s Bubble Economy--It’s the World’s Bubble Economy 173

The United States Will Suffer the Least 174

Think of the World’s Bubble Economy in Two Categories: Manufacturing and Resource Extraction 175

How the Bursting Bubbles Will Impact the World 179

If the World’s Bubble Economy Is Hit Harder than the U.S. Bubble Economy, Won’t That Be Good for the Dollar? 188

If the Rest of the World Is Collapsing, Won’t That Be Good for Gold? 188

International Investment Recommendations 190

Chapter 8: “You’re No Fun” What I Hear Traveling Across Our United States 193

By Aftershock Co-author Robert Wiedemer Florida:”You’re No Fun” 193

Philadelphia: Wharton Meets Wall Street 197

Green Bay, Wisconsin: I Can Be a Cheerleader, Too--in the Right Places 199

North Carolina: People Know in Their Gut that What I’m Saying May Be Correct 201

New York City: The Turkeys Were Living the Good Life Until … 202

New York City Again: When You Abolish Failure, You Institutionalize Stupidity 203

One Last New York Story: Is He Really Smart or Really Stupid? 204

A State of Extreme Denial Exists in Parts of the United States 205

What’s the Smart Money Doing Now? Just What They Did Before the 2008 Financial Crisis! Same Denial Now as Before 207

The Sun Will Shine after Every Storm (From My Hotel Room in North Carolina) 209

Part II: Aftershock Dangers and Profits 213

Chapter 9: Covering Your Assets How Not to Lose Money 215

The Three Rules for Not Losing Money 215

These Rules Are Simple but Not Easy! 216

Long Term versus Short Term 218

Rule 1: Exit Stocks Well Before the Market Cliff 221

Rule 2: Stay Away from Real Estate Until after All the Bubbles Pop 228

Rule 3: Avoid Bonds and Most Fixed]Rate Investments as Interest Rates Rise 241

Where’s the Best Place to Stash Cash? 243

How Long Must We Follow These Three Rules? 243

Letting Go Is Hard to Do 244

What Else Can I Do to Protect Myself? 247

Remember, Your Net Worth Is Not Your Self]Worth 249

Chapter 10: Cashing In on Chaos Best Aftershock Investments 251

Plenty of Profit Opportunities, but They Will Feel Quite Uncomfortable, Even Scary at Times 251

This Economy Is Evolving; Your Investments Should Evolve, Too 252

Three Goals of an Evolving Aftershock Investment Portfolio 254

Reducing Risk with a New Kind of Diversification 256

Two Other Aftershock Investments after the Bubbles Pop: Foreign Currencies and Foreign Bonds 272

Timing Is Everything before the Bubbles Pop, but Your Timing Won’t Be Perfect 274

Putting It All Together 275

Chapter 11: Aftershock Jobs and Businesses 279

The Rising Bubble Economy Created Huge Job Growth; Now the Falling Bubble Economy Means Fewer Jobs 280

Conventional Wisdom about Future Job Growth Is Based on Faith that the Future Will Be Like the Past 281

Why Conventional Wisdom on Jobs Is Wrong 283

What’s a Savvy Aftershock Job Seeker to Do? 284

The Falling Bubbles Will Have Varying Impacts on Three Broad Economic Sectors 286

Should I Go to College? 296

Opportunities after the Bubbles Pop: Cashing In on Distressed Assets 297

Dig Your Well before You Are Thirsty 298

Chapter 12: Understanding Our Problems Is the First Step Toward Solving Our Problems 299

If You Don’t Understand Why an Economy Grows, You Can’t Understand Why It Doesn’t Grow 300

You Need to See the Big Picture before You Start to Focus 301

Key Breakthroughs in the History of Economic Thought 302

Economics Needs a Breakthrough Big]Picture Idea like Geology Needed Continental Drift 309

So Why Aren’t We Getting an Alfred Wegener wor a Breakthrough Idea like Continental Drift? 311

Economists Have Become Academia’s Version of Financial Cheerleaders 311

The Demands to Get Tenure and the Rewards of the Good Life after Tenure Have Delivered a One]Two Punch to Creative Economic Thought 312

Where to Now? Answer: Economics Needs to Move from Being a Collection of Competing Philosophies to Being a Unified Science 315

Four Key Elements for Making Economics More of a Science 317

Where Do We Stand Today in Making This Transition? 321

The Economics Profession Does Not Want to Make This Transition 322

The Solution to the Lack of Interest in Making Important Changes in Economics: The Coming Aftershock 324

Chapter 13: Our Predictions Have Mostly Been Accurate, So Why Do Some People Still Dislike Them? 327

It’s Not a Cheerleading Book 329

It’s Not a Complex Book (Although It Is Based on Complex Analysis) 330

It’s Not a Crazy Book 333

It’s Not an Academic Book 333

It’s Not Suggesting Armageddon 334

It’s Not a Reality]Denying Book 335

Us versus the Comforters: How Aftershock Stacks Up against Other Bearish Books 335

Appendix: Are the Bond, Stock, and Gold Markets Manipulated? 343

Bond Market Manipulation 343

Stock Market Manipulation 344

Gold Market Manipulation 351

Market Manipulation Summary 354

Investment Impact 355

Bibliography 357

Epilogue: Say Good-Bye to the Age of Excess 363

Index 367